Many have known as knowledge the brand new oil. The digital economic system runs on knowledge. Data is essential to digital know-how, particularly synthetic intelligence (AI) functions. And meaning the world wants extra infrastructure to help the motion and processing of knowledge.
“We’re in a once-in-a-generation funding cycle for knowledge facilities for the time being,” said Felix Chan, a speaker at Brookfield Infrastructure‘s (BIPC -0.56%) (BIP -0.24%) annual investor day final 12 months. Chan famous that firms want to take a position over $1 trillion within the subsequent 10 years in knowledge facilities to help the expansion in knowledge consumption, pushed partially by generative AI. Brookfield Infrastructure has invested closely in constructing a number one knowledge infrastructure platform, positioning it to capitalize on this chance. That makes it a prime inventory to purchase now to play the approaching AI-driven knowledge heart increase.
AI runs on knowledge
Udhay Mathialagan, who leads Brookfield’s world knowledge heart platform, said on the identical occasion:
AI is all over the place and machine studying and AI development has simply exploded. There’s a number of theories, a number of views on how AI will present itself, the way it’ll be deployed. However the one factor, the one plain fact is the one manner AI might be delivered is thru bodily knowledge infrastructure on the bottom. And what meaning is knowledge facilities and plenty of them.
AI wants knowledge facilities to thrive as a result of the know-how requires an incredible quantity of computing energy and knowledge storage. That computing energy comes from specialised semiconductors developed by firms like Nvidia (NVDA 2.02%). AI apps, together with the uber-popular AI ChatBot ChatGPT by OpenAI, broadly use its H100 graphics playing cards. Firms are shopping for these chips hand-over-fist to energy their AI ambitions. Nvidia’s knowledge heart enterprise generated $18.4 billion in income in the course of the fourth quarter, a staggering 409% improve from the prior 12 months.
The AI increase can be driving firms to safe extra space in knowledge facilities to deal with the know-how used to coach AI fashions and generate outputs. That is fueling a constructing increase that would final greater than a decade. In response to Brookfield’s Chan, the world wants six gigawatts (GW) of extra knowledge heart capability over the subsequent three years to satisfy anticipated knowledge demand. That is staggering, contemplating there was solely 7.4 GW of capability on-line on the finish of final 12 months.
Constructing a number one knowledge heart platform
Brookfield Infrastructure has quietly positioned itself to capitalize on the info and AI increase over the previous few years. It entered the info heart market in 2019. The worldwide infrastructure operator spent $1 billion to purchase a portfolio of knowledge facilities from AT&T within the U.S., creating the Evoque Information Facilities platform. The corporate additionally fashioned a three way partnership (JV) with knowledge heart REIT Digital Realty that 12 months to amass the Ascenty knowledge heart platform in South America and has since fashioned one other JV with Digital Realty to develop knowledge facilities in India.
The corporate invested in three extra knowledge heart platforms final 12 months:
- Compass Datacenters: The corporate partnered with an current investor to amass Compass in a $5.5 billion deal. Compass develops mega knowledge heart campuses in North America.
- Data4: It entered the European knowledge heart market by buying Data4 for $3.8 billion. The corporate operates 31 knowledge facilities throughout six European international locations.
- Cyxtera: Brookfield used its Evoque platform to amass 40 knowledge heart websites out of chapter from Cyxtera. It additionally bought the related actual property of a number of websites from third-party landlords, together with Digital Realty.
Brookfield now owns pursuits in over 135 working knowledge facilities throughout the Americas, Europe, and Asia Pacific. They’ve 750 megawatts (MW) of essential load capability.
On prime of that, the corporate has contracts to help setting up one other 900 megawatts of knowledge heart capability over the subsequent three years. That pipeline provides Brookfield a transparent line of web site to develop its knowledge heart platform’s funds from operations (FFO) by 2.5 instances over the subsequent three years. In the meantime, it has the potential to develop over 2.3 GW of knowledge heart capability over the subsequent 5 years and is shopping for extra land to help future growth. For instance, following discussions with a buyer about their development ambitions, Brookfield Infrastructure acquired a strategic land web site in Milan in the course of the fourth quarter of final 12 months to help over 60 MW of extra capability.
A high-powered development driver
Brookfield Infrastructure’s knowledge heart investments might pay huge dividends for buyers over the approaching years. They assist help the corporate’s view that it will possibly develop its FFO per share by greater than 10% yearly. That ought to give it the ability to extend its already engaging dividend (at present yielding 4.7%) by 5% to 9% per 12 months. Add the dividend revenue to its earnings development price, and Brookfield might generate whole annual returns within the mid-teens, with extra upside because the market begins pricing in Brookfield’s AI-powered development potential. These elements make it an important AI inventory to purchase and maintain for the lengthy haul.
Matt DiLallo has positions in Brookfield Infrastructure, Brookfield Infrastructure Companions, and Digital Realty Belief. The Motley Idiot has positions in and recommends Digital Realty Belief and Nvidia. The Motley Idiot recommends Brookfield Infrastructure Companions. The Motley Idiot has a disclosure coverage.
